Redefined Interdependence in the Age of “Business Ecosystems” – Modern Diplomacy

An interesting culmination of ecological analogies to reiterate the nuances of strategic management in the age of technology curation
Business ecosystem is an upcoming buzzword in the management literature and there happens to be every reason for it to gain that prominence in the said parlance. Businesses are a strong network of multiple participants working together in tandem to be able to create, sustain and manage a desired value proposition, ensuing how each node within the ecosystem shares a symbiotic relationship with one another. Business ecosystem as an analogy is derived from the field of biology wherein the concept of ecology helps to create the understanding that today business have moved from adaptive stance to a more ecosystem-based stance. As per a study done by the BCG Henderson Institute reported that the word “ecosystem” appeared 13 times more frequently than it some decades ago. The testimony to this transition is the ever-growing inclination of organisations and corporations to build their self-sustaining ecosystems in an agile and ambidextrous way that not only supports the integrated network, but also aligns it with the externalities of their operating environment. Having said that, this “ecosystem building” is being considered as a full-blown strategic move by new age enterprises today, which redefines the way interdependence works in the age characterised by technology and innovation. It is an emerging trend in the field of management and is being highly valued by researcher, academicians and practitioners.
We are now slowly moving from the age of facts and opinions to the age of information curation and analysis. This allows business to change the lenses of how they view their value propositions. Technology and innovative/creative disruptions have allowed organisations to develop a systemic approach to ecosystem thinking. Following the analogy of the ecology concept, organisations are equally defined by the idea of evolution, growth and regeneration properties. This drawn from the idea of how humans evolve and develop over a period of time, whilst reinforcing the traits of efficient productivity and robustness in response. This is derived from the concpets of determinism and agency following the Darwinian theory 0f survival of the fittest. From a strategic standpoint, it is always a big question of the top management or the decision-making agents to demarcate what is strategic and what is not. This is where the ecosystem of view of the businesses helps to provide a resolution.
Ecosystems allows to clearly understand the actors and their roles and responsibilities for their deliverables. Ecosystem is equally an inherent part of the organisational culture, as it is something which starts at the top of the organization and following the top-down approach gets trickled down to each division and subdivision of the organisation as a translation of the strategic vision captured by the agents of the business ecosystem. Certain widespread example sin this regard could be Amazon, Microsoft, Apple, Uber, etc. as reported by a BCG study.
Business ecosystems allow cross interactions with other business ecosystems following how cross fertilisations work in biology, to sustain and bring synergy of better efficiency and uniqueness as a form of differentiation. From a management point of view, this entails the idea of having strong strategic alliances with and cross industries, which in turn enhances the competitive dynamics amongst firms and industries. Another interesting perspective to encapsulate here would be that of coevolution. Coevolution captures the interaction and reciprocal energy amongst species. In management, we considered the evolution and growth of the business ecosystems during the lifestyle of the organisation, and how organisations adapt to the changing market dynamics.
From a strategy point of view, it is advisable to always view organisations not as a standalone member but a part and an integrated nodal element of the business ecosystem interacting within its boundaries and outside its boundaries. Businesses are always considered to be the binding force of mobilising multiple set of resources at their disposal, from process, to people, to operations, to assets, to capital, to governance protocols, and so on and so forth. Again, to understand how important it is for business to follow a more structure route of building their ecosystems lies in the fact as to how it aids in the sustainable competitive advantage or the firms. With the culture of becoming a learning organisation today, the entities have found an interesting way to also spot the whitespace (an uncharted territory ready to be explored). As per a study by Deloitte, business ecosystems have opened new frontiers capturing novel elements of management such as supply chain value webs, design thinking, real time transformations, power of platforms, and a reimagined calculus of the corporate strategy. The implication, thereof is to on a strong sense of cooperation and collaboration. These models of arrangement are going to be sophisticated and marginally more complicated than before. It is imperative to acknowledge the beauty behind being able to attain advantage distinctively by merging complementary capabilities (ecosystem approach) than being an individual actor steering the opportunities and harnessing innovation and intelligence. Ecosystems for business have proven to be a healthy mechanism for innovation, learning and developing core philosophies for an organisation. Another subset or variant of business ecosystem is that of shared economy, but that happens to be more functional than business ecosystem which is a holistic consolidation or processes and practices. Technology has been avital source for change nowadays, and there has been a wonderful coming together of the physical and digital worlds.
Another interesting way to look at this is how business ecosystems have given the power to firms to solve the wicked problems. Wicked problems are difficult to solve issues that happen due to conflicting and unmanageable requirements of the environment. It nicely integrates speed and rate of change (momentum) and harmonise the process of co-creation (diversity).
Thus, in a nutshell it would be safe to say that business ecosystems are the new emerging aspect, which is not a strategic in nature but shall soon be the order of the day for enterprises, traditional and contemporary, both irrespective of the liability of age and size. But the question would still remain, how changeable are organisation in the breadth and width whilst sustaining their gravity of core competency?
The Fraying Harmony in Europe: Is a Trade War Brewing?
The Fed Faces Tougher Challenges Ahead
Research Scholar (Strategy) FORE School of Management, New Delhi, India
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Britain cannot catch a break, can it! I honestly thought Brexit would be the highlight in Europe for decades to follow. Then, Russia invaded Ukraine, and my perspective shifted. The European leaders joined forces to deter Putin, and I was sure this was a lasting commitment. Even as the British Prime Minister Boris Johnson grappled with the ‘Partygate’ scandal, I was glad that Europe was finally embracing unity again – leaving behind the bittersweet Brexit fiasco. Yet the desperate attempts by the Tory regime – or rather Mr. Johnson and his intimate cohort – to regain its lost shinning in England are unfortunately sounding the knell for the European harmony.
Mr. Johnson barely survived the confidence vote a fortnight ago. However, the vote exposed his vulnerable position as a leader as 148 Conservative lawmakers (roughly 41%) rebelled against him on the secret ballot. The position of desperation is ostensibly out in the open as Mr. Johnson races to appeal to his avid supporters in the echelons of the Conservative party vis-à-vis the rightist Brexiteers. But how exactly? Apparently, via targeting the emblematic conservative issues – the immigration policy and the Northern Ireland Protocol.
The overhyped political drama apropos of transporting British asylum seekers to Rwanda – a former German colony in East Africa – is all but a ruse by the Tory loyalists. Sure, the illegal migrants risked their lives crossing the English Channel. But the policy to settle imperiled migrants in a remote African settlement is a far cry from the touted well-being of refugees. The policy got denounced by human rights groups, religious leaders, and the international press. Even the British royalty couldn’t condone the inhumane and unjust policy that clearly breached the international refugee agreements. Ms. Yvette Cooper – the Labour Party’s Shadow Home Secretary – stated: “This is not, and never has been, a serious policy.” I admit, it is not! Until recently as the European Court of Human Rights (UCHR) ordered to ground the flight bound to Rwanda at the last gasp. Ms. Priti Patel – the Conservative Home Secretary – vowed to schedule another flight by protesting: “We will not accept that we have no right to our borders.” What followed was a chorus of grievances concerning European intervention in British law. Conservatives railed about exiting the European Human Rights Pact (EHRP). And even Mr. Johnson alluded to the possibility of leaving the European Convention on Human Rights (ECHR).
The current pushback against the European Convention eerily hearkens back to the days leading to the referendum. However, this uncanny resemblance with the Brexit outcry in 2016 is not coincidental. The Conservatives need a facade to veil the fragile foundation exposed by the vote of confidence. By invoking memories of the Brexit, Mr. Johnson hopes to muster confidence in his leadership and redress his tarnished image. Why else would he threaten to leave the Convention, a political milestone of Winston Churchill that even he once endorsed: “Keep the European Convention; it is a fine thing. Get out of the European Union (EU),” he said back in 2016. It is nothing but a tactic to maintain the illusion of strength as, despite threatening to leave the ECHR, any actual policy action would require several months of deliberations. Not to mention amendments to Scottish, Welsh, and Irish legislation to detach from the Convention completely. While the ECHR is unrelated to the EU, a similar (but graver) situation is unraveling in Northern Ireland – a combined effect could destabilize the European concord.
The Brexit custom rules have weighed heavily in the political arena – especially between England and Northern Ireland. In order to preserve the Good Friday Agreement (GFA) – a covenant that ended decades of sectarian violence between the Nationalists and the Unionists – the Northern Ireland Protocol was inducted into the Brexit deal. Customs checks got placed in the Irish Sea on goods entering Northern Ireland from the rest of the UK. The arrangement got designed to avoid fencing a border between the North – a British constituent country – and the Republic of Ireland – a member of the EU. The Unionists – led by the Democratic Unionist Party (DUP) – have contended the protocol was the first step toward alienation from the Great Britain. Discussions between the British government and the European Commission rambled on to discuss ease of restrictions – only to end at an impasse. The European Commission refused to make changes to the protocol while British lawmakers railed against the inflexibility of the bloc. It could have continued indefinitely. However, the May elections in Ireland unprecedentedly shifted the power dynamics.
Sinn Féin (the Democratic Socialist Party) – a Nationalist counterpart to Unionists – trumped the DUP, becoming the largest party in the Assembly – the first time ever in the centurial existence of Northern Ireland. The power-sharing agreement, enshrined in the GFA, would still delegate equal powers to both ministers nominated by respective parties. However, an aberration stands as, while the DUP acknowledges defeat in the elections, the party has refused to designate a Deputy First Minster – a requisite counterpart to Sinn Féin’s First Minister – until its concerns regarding the protocol get duly addressed. Hence, the political paralyses in Northern Ireland could reignite violence between the British loyalists and the Irish nationalists if the Assembly fails to convene soon. Thus, Mr. Johnson is admittedly in a political limbo, racing against the clock to avoid another political failure. Though this time, his solution seems more of a colossal failure in the long run.
By all accounts, the Northern Ireland Protocol Bill (NIP Bill) published last week is a menacing legislation. The bill envisions a bifurcated trade route between the rest of the UK and Northern Ireland. According to the published document, Mr. Johnson envisages trade operation on two lanes: the Green lane for trade with Northern Ireland; the Red lane for goods intended for the Irish Republic (and the rest of the bloc). By definition, goods on the Green lane would undergo no checks and follow British standards, while cargoes via the Red lane would be subject to regular EU customs and regulations. Furthermore, the contentious legislation conveniently allows the British government the authority to determine tax and expenditure in Northern Ireland. The Tory regime insists on the “Doctrine of necessity” to breach an international agreement unilaterally. However, the political deadlock in Northern Ireland would not exactly resolve since the legislation would typically take a year to enact. On the contrary, the European landscape could bristle shortly if the EU retaliates.
The NIP bill proposes an end to the jurisdiction of the European Court of Justice (ECJ) relating to settlements of trade disputes. Combined with the recent threat to exit the ECHR, the UK is basically saying: We will disregard the international law to save face in domestic politics. And to add insult to injury, we also refuse to accept your authority in mutual trade disputes and human rights violations – all in the name of supposed national autonomy and peace. Naturally, neither the Democratic Unionists nor the EU is buying the absurd excuse. The DUP lawmakers clarified that they will “wait to see how the bill gets implemented before deciding on a power-sharing government.” Even forgoing the time needed to enact the bill, it is exceedingly unlikely that the legislation would survive in the House that nearly voted Mr. Johnson out of office. In the meantime, a trade war with the EU seems on cards.
Brussels recently alluded to potential retaliation as the European Commission recommenced legal proceedings against the UK – frozen during talks over the protocol since 2021. If the British government fails to respond within two months, the EU could drag the UK to the ECJ. “The bleeding mistrust in EU capitals,” according to an architect of the Northern Ireland Protocol, is sharply raising the specter of a trade war between the EU and Great Britain. While the infringement proceedings of the ECJ could take months, in the short term, the Trade and Cooperation Agreement (TCA) – the deal ensuring tariff-free and quota-free trade between Britain and the European bloc – is seriously threatened. In a hypothetical scenario, the EU could unilaterally scrape the whole (or certain parts) of the TCA to impose tariffs on British goods. The EU could further inflict considerable damage by restricting European waters to the UK – debilitating the lucrative fishing industry. Even UK could respond by pinching trade with the EU and closing English markets to European businesses. Consequently, trade barriers and economic hostilities would inevitably catapult the cost of living in Europe – especially during a period when inflation is already touching a multi-decade high; a global recession is nearing. Ultimately, the fallout would significantly destabilize the European economies and throw Britain into economic isolation.
The drama in Westminster has invited the ire of the Biden administration as a fracture in the Western alliance would ultimately bolster the Russian offensive. Record-high inflation has already made political decisions regarding Russian economic exclusion extremely tricky. A trade war would ineluctably make Europe more divided and ill-prepared to part from Russian energy supplies. Hence, Brussels is tapering its response to the UK plausibly to safeguard the European unison. However, the tensions would remain high as Mr. Johnson and Company would continue to take a hardline approach to please the Brexiteers and deflect criticism over their own failure and notoriety. Nonetheless, a lack of resolve in the following months would upend Britain’s role in international law, spook faith in the European bloc, and fissure the underlying trust that would ultimately favor the Russian rhetoric.
On June 15, the Federal Reserve announced the results of its latest monetary policy meeting, approving a 75 basis point interest rate hike, the highest one-time increase in nearly three decades. At the press conference, Fed chair Jerome Powell said that inflation has unexpectedly risen since the May meeting. In response, the Fed decided to sharply raise interest rates. The next meeting is most likely to be 50 basis points or 75 basis points, and the move to raise rates by 75 basis points is not expected to become the norm. According to the decision of the last meeting, the Fed began to shrink its balance sheet from June 1, and planned to reduce its holdings of assets by USD 47.5 billion every month, which would increase to USD 95 billion after three months. The market had already anticipated that the Fed might take aggressive interest rate hikes, and this was exactly what happened, showing its determination to curb inflation in the short term. For this reason, some analysts believe that this will help restore the market’s confidence in U.S. monetary policy. However, many are worried about whether the U.S. will drive the global economy into a quagmire of recession under the aggressive tightening policy, adding to the increasingly pessimistic global economic outlook.
Researchers at ANBOUND are of the opinion that the Fed’s unconventional tightening policy is to resolve its post-pandemic easing policy, and to make up for last year’s policy mistakes where it asserted inflation was “transitory”. At the same time, in the context of the “politicization” of the inflation issue, its intention is to coordinate with the “mid-term elections” of the Biden administration, so as to avoid the Democratic Party from losing votes due to uncontrollable inflation. Controlling inflation has become the Fed’s primary policy objective right now, even if the economy gets cooling down. While the Fed has made a choice between controlling inflation and maintaining growth, it does not mean that the contradiction will disappear. Instead, it will rebound like a seesaw, and the future will face more severe challenges.
Powell said that the next meeting is most likely to be 50 or 75 basis points, and that 75 basis points of interest rate hikes are not expected to become the norm. The pace of rate hikes will depend on future data. The federal funds rate is expected to be raised above 2.0% and below 3.0% by the end of summer 2022. It is hoped that by the end of 2022, interest rates can be raised to a restrictive level of 3.0%-3.5%. The dot plot shows Fed officials expect the benchmark rate to rise to 3.4% by the end of this year and 3.8% by the end of 2023. Corresponding to this unexpected rate hike, the Fed has already started to shrink its balance sheet in June. This “double tightening” policy will not only have an impact on the U.S. and global capital markets, but also inevitably affect the U.S. economic demand. Regarding the risk of a U.S. recession, Powell believes that after a slight decline in the first quarter, overall economic activity appears to have picked up, and the demand side of the economy is still running red-hot. He stated that the Fed will not try to induce a recession in the U.S. right now, and that the U.S. economy is well prepared for the FOMC to raise interest rates, adding that real GDP growth has picked up in the second quarter. He noted that there is no progress on inflation falling, though the Fed would like to see signs of that. Powell also expressed that wages are not responsible for the current high U.S. inflation, and there is no wage-price spiral.
Powell remains confident in the U.S. economy. Indeed, judging from the employment and other data, the U.S. economic growth remains healthy. However, the U.S. capital market has begun to show signs of adjustment. Not only U.S. stocks have retreated, but the bond market has also fluctuated, driving the yields of government bonds with reference significance to rise sharply. At the same time, the real estate market, which has performed well after the pandemic, will also be affected by the sharp rise in interest rates, and there are signs of “topping”. These economic and financial changes, as well as the slump in consumer demand brought on by high inflation, mean the outlook for the U.S. economy is not as rosy as Powell had painted. Raising interest rates and shrinking the balance sheet too quickly is bound to have a significant inhibitory effect on the U.S. economy. Even if economic growth does not fall into recession, it will decline as inflation falls, which will intensify contradictions such as debt, investment, and distribution.
At the same time, Powell mentioned that the Fed will carefully study why U.S. inflation is “stubbornly high”, indicating that the Fed’s aggressive interest rate hike policy may have limited effect on curbing inflation in the short term. Deep-rooted inflation has both demand and supply-side structural factors, which means that after the inflation level falls, it will still be higher than the Fed’s 2% policy target for a certain period of time. Therefore, as the Fed’s roadmap shows, the pace of the rate hikes will not stop anytime soon, and may continue to increase until the mid-term elections. Under the maintenance of inflation and the downward trend of the economy, the dilemma that the Fed will face in the future has become more prominent.
The “overshoot” of the Fed’s monetary policy will not only have a huge impact on the U.S. economy, but will also drag global central banks into monetary policy tightening, which is bound to hurt the global economy. Some media reported that at least 60 central banks around the world have taken tightening actions earlier than the Fed or followed it during the year, while some have also adopted multiple rounds of interest rate hikes. Many economists have warned that the recent wave of rate hikes is only the beginning of a global tightening cycle. In Europe, Japan and others, global financial conditions will need to tighten further in order to re-anchor inflation expectations. Researchers at ANBOUND pointed out that under the expectation of global central bank policy tightening, economic growth will decline in tandem with inflation falling from a high level, and a new balance of coexistence of low growth and moderate inflation is likely to happen. It should be noted that the current global economic, trade, financial, and monetary environment is undergoing drastic changes, and it would be difficult for future development to return to the pre-pandemic “normal” model, which will exacerbate the trend of global economic fragmentation.
Final analysis conclusion:
The Federal Reserve’s tightening policy means that it has made a “politicized” choice between controlling inflation and maintaining growth. This will inevitably affect the U.S. and the global economy. This means that there will be more prominent contradictions in the future. As such, one cannot rule out the change of government in the United States due to the failure of sharp interest rate hikes.
Indonesia is home to the biggest palm oil cultivation in the world and has become the key actor in sufficing the global demand for palm oil. (Gro-Intelligence, 2016) Indonesia itself has sustained its position as a major producer of palm oil, due to the economic contribution of palm oil such as job creation and industrial promotion. (Suhartadi, 2019) Considering Indonesia’s intense export of palm oil, they see the importance of utilizing regional trade agreements to ease the conduct of export. Indonesia’s participation in the Regional Comprehensive Economic Partnership (RCEP) has provided a series of opportunities to have fewer restrictions when it comes to trade in the region and other member countries. Indonesia’s involvement in the RCEP would affect the perpetuation of both several issues happening in Indonesia and their dependency on foreign markets for national income. I would like to discuss and elaborate the negative implications of Indonesia’s involvement in RCEP to the palm oil industry, domestic supplies, and the welfare of Indonesian workers.
The establishment of RCEP aims to integrate the regional markets of Southeast Asia, and other involved countries such as New Zealand, Australia, Japan, South Korea, and China. (, 2022) This agreement upholds the value to maintain an open market, enhance regional economic integration and support an inclusive multilateral trade environment. However, specifically for Indonesia and its specialty in producing palm oil, RCEP is a double-edged sword.  The trade liberalization that RCEP brings will create a reduction in export duty, therefore leads to an increase of price in the domestic level and a decrease to the global level. According to a study of palm oil sells, a decrease of 10% in expert duty would increase domestic price by 12.22%. (Ernawati et al., 2016) This would then trigger the export demand of palm oil due to the reduction of trade tariff. Increased domestic price could lead to different political economic dynamics, such as the case of the Indonesian oil crisis in early 2022, noted that there was a boom in Crude Palm Oil (CPO) export, leading to the decision of the Indonesian president to establish export restrictions. (Aulia, 2022)
As RCEP facilitates the regional community to purchase Indonesian palm oil, the cultivation in Indonesia would also be enhanced. This would increase severity of socio-economic problems occurring in Indonesia, such as deforestation and exploitation of labor, considering RCEP’s lack of labor protection. When it comes to deforestation, palm oil plantation expansion in Indonesia is considerably the reason behind it. Becoming the 82% of total global production, the Indonesian Ministry of Agriculture noted that Indonesia have sacrificed 15,08 million hectares of land for palm oil cultivation. (Rizaty, 2022) There has also been some cases where major palm oil companies in Indonesia, PT. Wilmar, was accused of creating forest fire in Kalimantan, Southern Sumatera, and Jambi. (Walhi, n.d.)  Moreover, there has been several concerns addressed by institutions such as the Trade Union and European Union on RCEP’s lack of labor protection. The International Labor Organization (ILO) noted that there are over 16 million palm oil workers in Indonesia who are in extreme poverty. Some reports also showed the investigations of workers whose rights were abused and suffers under palm oil companies, where they were threatened to work or else, they get unpaid.  (Prakarsa, 2021) This have shown the social and environmental cost for palm oil production in Indonesia, where the trade liberalization that RCEP grants would bring more harm than good. This is also because upon the ratification of the RCEP, Indonesia has been ambitious on utilizing the RCEP as an instrument to boost local industries and enhance their participation in the regional trade dynamics. In sum, Indonesia enters RCEP without regards to domestic conditions that are prone to harm as Indonesia further integrates its market to ASEAN, and other major members of the RCEP such as China.
Although RCEP would bring positive impacts to several industries in Indonesia, palm oil is not one of them. Indonesia enters RCEP without any reformation or systematic changes to address domestic issues. Therefore, as argued, Indonesia’s involvement in the RCEP would only perpetuate or worsen socio-economic issues in Indonesia and most importantly it would enhance Indonesia’s dependency towards palm oil production and the foreign market for national income. To ensure the effectivity of palm oil exports, Indonesia should reconsider the trade policies and propose different treatment for specific goods such as CPO. A fair and suitable market export share would increase the effectivity of Indonesia’s palm oil production and the profits it gains from trade, as it would compensate the social and environmental cost of palm oil production and cultivation. At the domestic level, the Indonesian government should also focus on policies that protects labor and environmental rights, instead of surrendering their welfare and conditions for the sake of satisfying the global market.
In conclusion, there are much to reconsider for Indonesia as a member of the RCEP. Indonesia will be responsible to meet more demands due to the trade liberalization of the agreement, therefore creating a balance between the interest of the RCEP and domestic conditions is necessary, even mandatory. A reformation and a trade policy re-orientation is needed for Indonesia to sustain its position as a major palm oil producer, and at the same time becoming a competent country to do so.
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